Overview of employment law 2022

Happy New Year 2023 and Happy Chinese New Year of the Rabbit.

2022 was an exciting year for employment law. In the wake of COVID-19, the Government amended the Employment Ordinance (Cap. 57) (“EO”) by introducing the Employment (Amendment) Ordinance 2022 in June last year, yet most (if not all) of the amendments have since become irrelevant because of the Government’s changes in policy (with the quarantine mandate for COVID positive patients being scrapped starting from 30 January 2023). At the time, there were major changes that aimed to encourage employees to get vaccinated where dismissal of employees due to refusal to receive vaccination without sufficient medical reasons after request being made by employers is not considered as unreasonable dismissal.

There had also been some very interesting development in case law, where the implications are wide. We have selected below some cases that are relevant to employers, employees, in-house practitioners and human resources professionals.

 

Potential criminal and personal liability of employee director
for employer company’s failure to pay wages/Labour Tribunal award

In general, directors or senior officers of a corporate employer are not personally liable for the wages of the employees. However, if the employer company fails to pay its employees outstanding wages pursuant to an award of the Labour Tribunal, the director or the senior officer may become criminally liable if the company’s default is committed with the consent or connivance of, or to be attributable to any neglect on the part of the director or senior officer. In such case, the director or the senior officer may further be ordered to pay the outstanding wages personally.

In 香港特別行政區 訴 永富 (香港) 有限公司及另一人 [2022] HKCFI 2634, the Court of First Instance (“CFI”) reiterates that a director or a senior officer of an employer company may fall within the definition of “employer” under the EO. If the corporate employer fails to pay employees outstanding wages, the court has a discretion under section 65(1), EO to hold the director or the senior officer personally liable for any outstanding wages.

 

Decision

Takeaway points: A director or a senior officer may be ordered by the court to pay the outstanding wages owed by the corporate employer if the director or the senior officer falls within the definition of “employer” under the EO and commits an offence under the EO. An employee director or senior officer commits an offence if the employer company fails to pay any sum payable under a Labour Tribunal award with the consent or connivance of, or to be attributable to any neglect on the part of, that director or senior officer.

Know more about the case here.

 

Is “compensation clause” in an employment contract enforceable?

In Ng Yan Kit Alfred & Anor v Ever Honest Industries Limited & Anor [2022] HKCFI 1834, the CFI reaffirmed the penalty rule applied in Law Ting Pong Secondary School v Chen Wai Wah [2019] HKCFI 2236 and clarified that if a “compensation clause” is a penalty clause, it is not enforceable. Know more about Law Ting Pong Secondary School v Chen Wai Wah here.

Facts

In the Ng Yan Kit Alfred case, the claimant employee was employed under an employment contract with a compensation clause which, among others, stated that the defendant employer may dismiss the employee within 3 years after the commencement of the contract by paying a compensation of his 2 whole year’s salary. Their relationship turned sour and the employer dismissed the employee with only 3 months of salary as payment in lieu of notice.

The employee commenced proceedings at the Labour Tribunal claiming 2 years’ salary under the compensation clause. The Tribunal dismissed his claim and the employee appealed.

Decision

On appeal, the CFI adopted the two-step inquiry approach in the Law Ting Pong Secondary School case. First, the court has to construe the relevant clause in the contract to determine whether it is a contractually agreed method of lawful termination of the contract which gives rise to a primary obligation to pay, or just damages for breach of contract leading to a secondary obligation. Second, if only a secondary obligation arises, the court should identify the legitimate interest of the innocent party that is being protected by the clause, and then assess whether the clause is out of proportion to such legitimate interest by considering all the circumstances of the case.

Takeaway points: In the employment context, “compensation clause” will only be enforceable if it is not a penalty clause. In determining whether the compensation clause is a penalty clause, employment contracts should be interpreted against their background facts and practical objectives that they intend to achieve.

Know more about the case here.

Does a receipt for payments upon termination signed by an employee containing words “full and final settlement of any claims against my employer” bar him from bringing a claim against the employer?

Section 70 (Contracting out), EO provides:

“Any term of an employment contract which purports to extinguish or reduce any right, benefit or protection conferred upon an employee by this Ordinance shall be void.”

It is settled law that section 70 only strikes down any term of a contract of employment that seeks to do what is prohibited. Section 70 has no application to composition agreement or settlement agreement, which is not a term of an employment contract. Likewise, section 70 simply does not apply to invalidate an ad hoc agreement, arrived at by the employer and employee not at the beginning but only at the time when one of them wants to terminate the contract of employment – which is common enough situation, and that ad hoc agreement is not a contract of employment.

It is common for employers to provide leaving employees with a receipt for payments upon termination (or completion of employment contract) for the employee to sign off, where the employee will confirm he has checked the employer’s calculation of final payments, the calculation is correct and he has received final payments. Such receipt may also seek the leaving employee to confirm there is “no other outstanding amount owing to me by the employer” and, in some cases, “full and final settlement of any claims against my employer”.

Does such a receipt for payments upon termination signed off by an employee bar him from bringing a claim against the employer at the Labour Tribunal? Is it void under section 70? Or section 70 has no application because it is a subsequent ad hoc agreement or settlement agreement that is not a contract of employment?

Prior to the CFI’s decision in Dock Brian v Pacific Gourmet Holdings Limited [2022] HKCFI 444, case law authority suggests a receipt of terminal payments containing the words “I acknowledge [receipt] the above listed payment as full and final settlement of any claims against my employer” (Minarni v Ho Ho Fan Ivy [2018] HKCFI 852) or a document containing the words “In signing this receipt I agree that I have no further claims financial or otherwise, in respect of any such previous contract against the Company” (Poon Kwok Leung Lenny v Swett (China) Limited HCLA 19/2012, unreported, 19 December 2012) are prima facie valid settlement agreements, which prevent the employees from claiming under the EO and the Labour Tribunal has no jurisdiction.

In the Dock Brian case, the defendant employer gave the claimant employee a pay cheque for his last month’s salary and accrued holiday pay, and asked him to sign a document, which stated that:

“I checked the above calculation and hereby confirmed the final payment of my remuneration is correct and also confirmed there is no other outstanding amount owing to me by the company.”

The Labour Tribunal pointed out that the document was prima facie a valid settlement agreement and adjourned the employee’s claim sine die for want of jurisdiction. The Tribunal’s rationale was (1) the document, being a valid settlement agreement, has the effect of preventing the employee from claiming under the EO, such that (2) the document would have to be declared void and set aside by a higher court first before the employee could proceed with his claim in the Tribunal, and that (3) the Tribunal has no jurisdiction to declare a settlement agreement void or to set it aside. In reaching its decision, the Tribunal relied on the CFI’s decisions in Minarni and Poon Kwok Leung Lenny. The Employee appealed to the CFI against the Tribunal’s decision.

At the appeal, the CFI took the view that Minarni and Poon Kwok Leung Lenny was wrongly decided. The employee’s claims were for (a) severance payment, which is based on Part VA (Severance Payments), sections 31B(1)(a) and 31G of the EO, and (b) terminal payment and monetary compensation, which is based on Part VIA (Employment Protection), sections 32A(1)(c), 32M, 32O and 32P of the EO. The CFI was of the view that the Tribunal has jurisdiction over any question as to the right of an employee to severance payment under Part VA of the EO and over a claim for remedies under Part VIA of the EO. The CFI allowed the appeal and remitted the employee’s claim back to the Tribunal for re-consideration and determination.

Takeaway points: In Dock Brian, the CFI made it clear that Minarni and Poon Kwok Leung were wrongly decided. If Dock Brian will be followed by the courts, then a document signed by the employee, which on the face of it, contains an agreement between the employer and employee for the settlement of all the employee’s claims against the employer arising from the termination of the employee’s contract of employment will no longer in itself bar the employee from bringing a claim in the Labour Tribunal – the Tribunal does have jurisdiction to hear the claim and determine the proper effect of that document. It will not be necessary for the employee to have the document declared void and set aside by a higher court before he can proceed with his claim in the Tribunal.

The implications can be wide, since the Tribunal does not only have jurisdiction on “any question as to the employee’s right to a severance payment under Part VA”, and “an issue arising on his claim for remedies under Part VIA of the EO” (which are the basis of the Employee’s claim in Dock Brian), it also has jurisdiction on a claim for a sum of money, whether liquidated or unliquidated, which arises from “the breach of a term, whether express or implied, of a contract of employment” or “the failure of a person to comply with the provisions of the EO”.

Know more about the case here.

 

The Hong Kong court adopted a pro-arbitration stance and stayed Labour Tribunal proceedings pending outcome of arbitration

The Labour Tribunal has exclusive jurisdiction over claims arising from breach of employment contract and non-compliance of the EO. What about claims arising from employment that are subject to an arbitration agreement? In MAK v LA [2022] HKCFI 285, the CFI adopted a pro-arbitration approach in interpreting an arbitration clause regarding the staff bonus scheme and granted a stay of Labour Tribunal proceedings in favour of arbitration.

Know more about the case here.

Can a male employee be subject to sex discrimination?

In Tan, Shaun Zhi Ming v Euromoney Institutional Investor (Jersey) Ltd [2022] HKDC 622, the District Court found that the defendant employer has discriminated against a claimant former male employee, who was subject to an unsubstantiated sexual harassment complaint.

Facts

The employee was accused by a female colleague of sexual harassment in the workplace, upon which the employer conducted some investigations and interviewed several witnesses. Despite the lack of sufficient evidence proving the accusation, the employer requested the employee to apologize to the female colleague. The employee refused to do so, and he was subsequently dismissed immediately by payment in lieu of notice. The employer claimed that the dismissal was irrelevant to the sexual harassment complaint but to the employee’s conduct during and following the investigation.

Decision

The District Court considered that when assessing whether the employee was discriminated, both sides’ evidence would be examined to determine if there are substantiated reasons for the termination. If no such reason or explanation could be found, it would be legitimate for the court to infer the presence of discrimination against the employee as a result of a pro-female bias.

Takeaway points: Tan, Shaun Zhi Ming serves as a reminder for employers that sexual harassment complaints must be handled with care. Whilst many employers are well aware of the risks of claims by female employees for sexual harassment under the Sex Discrimination Ordinance (Cap. 480), there are also legal risks relating to claims from the employees who are accused of committing the sexual harassment. Employees should be mindful about such risks as men (as well as women) can be subject to sex discrimination. 

Know more about the case here.

 

Is calling a foreigner “Gweilo” race discrimination?

If I call a foreign co-worker a “gweilo” (鬼佬), is that racial discrimination?

When the Equal Opportunities Commission was asked whether the word “gweilo” could be regarded as harassment under the law, their spokesman said that it would depend on several factors including the actual circumstances of the case, the context of the particular situation and the relationship between the parties involved.

In February 2022, the District Court handed down a landmark judgment in Haden, Francis William v Leighton Contractors (Asia) Ltd [2022] 1 HKLRD 995, [2022] HKDC 152, a high-profile racial discrimination case (dubbed as the “Gweilo” case) that has attracted much media attention. In this case, the District Court had to consider whether the use of the words “gweilo” and “foreigner” at work was racial discrimination, and whether the employee’s race was the reason for the termination of his employment.

The employee claimed that the term “gweilo” was frequently used during discussions between his fellow Chinese co-workers, which, as he alleged, showed racial hostility in the work context. On the facts of the case, the District Court found that the employee failed to prove that there was a background of racial hostility in the project he was involved in. The Court was of the view that the use of the term “gweilo”, even if it was used in a workplace, would not necessarily carry a derogatory meaning. One must consider the context in which the term “gweilo” was used.

Takeaway points: Whilst the use of term “gweilo” at workplace may not be discriminatory, it can be depending on the context. The court may infer race discrimination from the facts and circumstances that disclose a possibility of discrimination. Once the court is satisfied that there is a possibility of discrimination at the workplace, it will look to the employer for an explanation. Therefore, it is best practice to avoid the use of the term “gweilo”.

Employers should put in place measures to manage the risks of racial discrimination claims, such as internal policies on anti-discrimination, proper record keeping and equal opportunity recruitment. Employers should obtain legal advice and assistance in setting up and reviewing anti-discrimination policies.

Know more about the case here.

 

For enquiries, please feel free to contact us at:

E: employment@onc.hk                                                    T: (852) 2810 1212 W: www.onc.hk                                                                    F: (852) 2804 6311 19th Floor, Three Exchange Square, 8 Connaught Place, Central, Hong Kong

Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2023